This month’s Friday Five highlights both circuit and district court opinions on the scope of ERISA preemption, discretionary review and exhaustion of administrative remedies.
- Ninth Circuit Confirms ERISA Does Not Preempt State-Run IRA Savings Program. In a dispute over a California law that creates a state-managed individual retirement (“IRA”) program for employees without access to a tax-qualified retirement savings plan through their employer, the Ninth Circuit affirmed the district court’s conclusion that the program was not a de facto ERISA plan and, thus, was not preempted. The state IRA program automatically enrolls eligible employees of certain private employers who do not provide employees with a tax-qualified retirement savings plan and requires those employers to remit certain payroll deductions to the program to fund the employees’ IRAs. The case was brought by a taxpayers association, which challenged the state IRA program in its capacity as an employer that did not provide the requisite retirement savings plan—not in its capacity as a public interest organization promoting taxpayer rights. Thus, the court found the group had standing to challenge the California law. The court held that the ERISA preemption challenge failed, concluding that the state IRA program was not an ERISA plan as it was maintained by the State of California, not employers; did not require employers to operate separate ERISA plans, and did not relate to ERISA. Thus, ERISA did not preclude the California IRA program, requiring employers who did not otherwise offer a tax-qualified plan to participate in the program. Howard Jarvis Taxpayers Ass’n v. California Secure Choice Ret. Sav. Program, No. 20-15591, 2021 WL 1805758 (9th Cir. May 6, 2021).
- Second Circuit Rejects De Novo Standard of Review Despite Lack of Clearly Delegated Authority to Determine Benefits to Administrator. The plaintiff challenged the denial of benefits, arguing that the district court should have reviewed the plan administrator’s determination of eligibility under a de novo standard of review. The Second Circuit rejected the plaintiff’s challenge on four grounds: (1) the Plan gave the administrator the authority to determine eligibility for and the amount of any benefit and to evaluate all benefit claims and appeals; (2) the Plan required claims to be determined in accordance with “reasonable claims procedures,” which indicates a subjective standard; (3) the administrator created the process by which the administrator itself determined eligibility; and (4) the delegating language of the Plan “fits comfortably” with language from precedent finding discretionary authority. The court then concluded that the administrator did not abuse its discretion. It did, however, note that the plaintiff had made a colorable claim that the administrator had violated ERISA’s claims-procedure regulation by withholding certain claims procedure documents but that the plaintiff had not timely raised the argument. Thus, the court affirmed the denial of benefits. Tyll v. Stanley Black & Decker Life Ins. Program, No. 20-1060, 2021 WL 1748474 (2d Cir. May 4, 2021).
- Court Finds Failure to Exhaust ERISA Administrative Remedies an Affirmative Defense Sufficient to Dismiss the Plaintiff’s Complaint. The plaintiff sought dental benefits after a biking accident resulting in significant dental work. She was denied benefits under an ERISA-governed plan. After a first-level appeal, she received a letter upholding the denial, explaining that she had not provided information sufficient for a determination as to whether the services were covered, and advising her that she “may request a second level review” within 60 days. The plaintiff submitted a second appeal 66 days after the first-level denial. The first-level denial was upheld because of the untimeliness of her second-level appeal. The plaintiff sued, seeking monetary damages for the dental bills and equitable relief for the alleged breach of fiduciary duties. The court upheld the denial, concluding the plaintiff had adequate notice of the second-level appeal requirement through unambiguous mandatory language stating that she “must send a letter requesting an appeal . . .” Moreover, her failure to exhaust administrative remedies was not absolved by any exceptions, including equitable tolling or futility. Finally, the court dismissed her breach of fiduciary duty claim, noting that a 502(a)(3) claim “cannot exist solely as a second route to the damages sought under 502(a)(1)(b).” Because the plaintiff was seeking monetary damages, such damages were not available as equitable relief. Benson v. Tiffany & Co., No. 20 CIV. 1289 (KPF), 2021 WL 1864035 (S.D.N.Y. May 10, 2021).
- A Decision Period is Tolled if Party Seeking Benefits Fails to Provide Necessary Information for Administrator to Make Eligibility Determination. The plaintiff challenged her denial of long-term disability benefits after a diagnosis of Parkinson’s disease. Generally, an administrator is required to render a decision within 45 days of receipt of the claim. The administrator rendered the decision, however, 59 days after receipt of the plaintiff’s claim. The plaintiff argued that the untimeliness of the decision required rejecting the administrator’s denial of benefits. The court, however, noted that the administrator on two separate occasions requested additional information from the plaintiff to determine her claim. The plaintiff never provided such information, and the administrator issued the denial just 12 days after the second request for information. The period to make a determination was thus tolled, and the untimeliness was not grounds to challenge the denial of benefits. Stewart v. Hartford Life & Accident Ins. Co., No. 2:17-CV-01423-KOB, 2021 WL 1816961 (N.D. Ala. May 6, 2021).
- Removal of State Law Claims Related to an ERISA Plan Was Proper Although the Complaint Did Not Plead an ERISA Cause of Action. A pro se claimant asserted state law tort claims after being denied long-term disability benefits. The defendant removed, and the plaintiff argued that the case was not governed by ERISA, that it was a tort case, and that she had not been provided information about her plan. The court rejected this argument, explaining that the plaintiff’s claim fell within the scope of ERISA because it was an employee welfare plan that did not fall within a regulatory safe harbor. Specifically, the employer’s name and logo were prominently displayed and the employer was identified as both the plan sponsor and the plan administrator. Moreover, the court reviewed the ERISA plan documents, which were not attached to the complaint but the authenticity of which the plaintiff did not dispute. The court thus concluded the plan was covered by ERISA, removal was proper, and the defendant’s motion to dismiss in federal court would be granted with leave to re-plead as an ERISA claim. Patterson v. Hartford Life & Accident Ins. Co., No. 21-CV-21255, 2021 WL 1945829 (S.D. Fla. May 14, 2021).